The previous day's closing price is an underrated reference level on EURUSD. Using the New York 17:00 close as the day boundary, it's worth testing whether it does any work in the London morning.
What to watch for:
- When price opens within 15 pips of the previous close, does it get pulled back to it during the morning?
- When price crosses it with momentum, does the first pullback to it hold, giving an entry with a 5 to 7 pip stop?
- On days after a big range, the previous high and low are probably more important than the close.
The trap with any line on a chart is confirmation bias: you draw it and then notice the times price reacts. The fix is to record every touch, not just the ones that look good, and score each one in advance: held to 1R, or broke. A worked example of how to read it: if 22 of 40 first pullbacks reach 1R before the stop, that's 55%, and with 1R targets it's barely above break-even after costs. The level would need to combine with something else, such as the Asian range sitting close by, to be worth trading.
Also decide which close you use and stick to it. Broker server time and New York 17:00 can give different values.
Does anyone use the daily close as a level? And which close do you use?
